Innovative and affordable pharmaceuticals, many of which are now market leaders in some 20 Latin American countries, are the results of great investment and foresight by Mega Pharma to set up its labs in Uruguay and effectively blaze a trail for the previously ‘unthinkable’ sector in the country. CEO Gianclaudio Broggi reflects on the impact of Mega Pharma and how its high quality standards hold up to any international inspection.
In a South American region with Argentina getting out of a deadlock situation and Brazil with a projected fall of 3.3% of its GDP according to the International Monetary Fund, Uruguay stands out as a stable country with a solid legal framework that enables foreign investment and sets a reliable ground for international companies. How would you analyze the international positioning of the country?
South America had a very important period of expansion, as all emerging economies, perhaps a bit less than Asian countries, but a strong flow of foreign direct investment was coming into the region, which slowed down in the last two years.
Uruguay is within Mercosur. And Mercosur is in crisis today: changing the pro-tempore presidency of Mercosur to Venezuela with Argentina, Brazil and Paraguay against it is not helping us in international trade and the future development of Uruguay.
Uruguay offers legal security and political stability. Here we have state policies that are crucial for a long-term development of a country, especially in education, health, and whatever other areas we want to promote.
So what people find in Uruguay are a government and an opposition determined to promote different sectors. In the last 10 years, with the enhanced law on the investment promotion and the law of free zones, we have been able to attract companies like ours, the paperers or some others. We provide incentives for investments and guarantee security so we can stand out in the region.
In our interview with Chancellor Nin Novoa he mentioned that Uruguay is a small country and should grow looking out, but that it needed to make an effort to add value to products. In that sense, in the pharmaceutical sector, how would you describe the quality differential?
Pharma is a sector that has products of high added value. We have product development in which chemicals are involved, you have academics working on research and develop a pharmaceutical product, and who right out of college and have a job placement.
Pharmaceutical production is not an easy production: there are processes with world-class technology, machines that are not Uruguayan – are European, Italian, German, there are some from the US – but the final value is 100% Uruguayan.
The raw material comes from the outside, but it is a smaller percentage of the cost of product. The rest is all Uruguayan added value.
In the case of the pharmaceutical industry and in the case of our company, the value added to the product is almost 100%. Thanks to us, end users throughout Latin America are looking at their health product labels and that say "Uruguayan industry." There goes the country’s brand, why it is so important the issue of quality. In each pill or tablet that a patient takes the Uruguay brand is at stake. There is a big responsibility.
Uruguay does not have a certification agency recognized in the whole world. How does that harm the sector?
The Ministry of Public Health has agreements with some other health agencies in the world. We don’t have any problems with the vast majority of them, but with the big ones. In Latin America, with Brazil, Mexico and Colombia, their agencies have to come to audit our plant each year.
This goes into our cost bill, each visit comes at $30,000. Those are some countries. There are others like Chile, Paraguay, Bolivia, Central America, that have no issue with Uruguay. But there is not a general policy.
Countries in the world are divided into three categories. Countries with low regulatory requirements, middle regulatory requirements and high regulatory requirements. Uruguay is in the middle regulatory requirement category. For us, we really recognize the health authorities in the United States, Europe and others.
In the case of our company, we are already in compliance with processes and documentation according to the highest standards, so if the country scaled up to high regulatory requirements we would be ready tomorrow. But we understand that by doing that there might be local and national laboratories left out and the country is careful with that.
Mega Pharma is a union of top international laboratories. What are the implications for the company that unites of all these laboratories?
Quality is a requirement that comes out of our shareholders. We have German shareholders who are life-long linked to the pharmaceutical industry and we have to keep the highest standards.
We have to have documentation about every single step we take. If the FDA comes, or the EMA, which is the European authority, they would find everything perfect.
If we want to export to demanding countries, we must meet the highest quality standards. The only countries remaining with low regulatory requirements are Paraguay, Bolivia and the Dominican Republic.
We have to go to the maximum regulatory requirement. And our vision as a company is to offer the best products to the patient.
Uruguay has the cheapest prices in the region when talking about pharmaceuticals, but it also competes with products coming from China, India or Pakistan; they can actually be cheaper. How does it work for Mega Pharma to compete with those countries?
We stand by the quality of the brand. What we do is to invest in product quality and brand positioning. We do not sell generic items.
Our products are interchangeable generic, or branded generics, equivalent bio.
In the event that some products are not our own research, they have to be bio equivalent; they must have the same proven result as the original.
When you have such a product in which there is much investment back, you have to try to distinguish yourself. And, of course, at an affordable price. But if we are to compete against the Chinese and Indians, we have to stand out by quality and brand because we can’t scale like they can.
How did the merger happen and why was Uruguay chosen for the new lab of Mega Pharma?
The union happened in 2002. This is an industry that tends to concentrate; there are mergers and acquisitions continuously. In our case, several laboratories decided to unite under Mega Pharma to have cost synergies and share knowledge on production, development, quality control and market intelligence.
This laboratory is now very strong in Latin America and may well compete with large multinationals. Mega Pharma is the number four laboratory in Latin America.
I was in the whole choice process and of course, as I am Uruguayan, fought to get it here. In Uruguay perhaps the labor force is a little more expensive, but it is very well prepared, and if we want to sell quality Uruguay gives us greater assurance than other countries – especially for a long-term view, legal certainty and political stability are essential.
How do you see the pharma sector in Uruguay right now?
The sector is growing and it’s somehow thanks to Mega Pharma. This project makes the quality standards of other national laboratories start to rise.
Also, raising levels of demand implies that other smaller laboratories should grow and invest in their plants and become ready to export.
After seeing this from Mega Pharma and the impetus given to the sector, the government said this sector is now a priority; the sector has grown but is still very young.
It has attracted international laboratories and hopefully others will come because what we really need in Uruguay is to form a cluster.
We talked about the quality standards of Mega Pharma and you mentioned they reach the standards of the most sophisticated markets, but when do you think the company will start reaching Europe or the US?
That is a good question. I'm trying to convince the shareholders. The shareholders have their businesses in Europe especially and are investing heavily in biotechnology.
Mega Pharma is the company that grew from Latin America and it is intended for its home region. However, we are already exporting biotechnology and bio-similar products to Russia, Pakistan, Turkey, but not Central Europe or the United States yet.
These two markets have significant barriers to entry. The strategy for entering these markets, in general, is to buy a company that already operates in them. And from there start growing. Export from here is not easy.
As I said, this project itself is designed for Latin America, but one wonders that as we are to European and American standards, which are more interesting markets, then why not? We are evaluating.
Mega Pharma’s contribution to the development of a pharmaceutical cluster is impressive. It provides work to more than 350 people and has plans for growth. What does Mega Pharma mean for Uruguay?
I think our company is a very good product to have in the showcase for Uruguay: Uruguayan missions can show investors that our country is not only agriculture.
What adds Mega Pharma to Uruguay is to start talking about a sector that was unthinkable a few years ago. And it is one of the most reputable sectors there is globally. The government can show this: that a company the size of Mega Pharma in Latin America decided to settle here is a very good claim.
On a more personal level, what are the things that fill you with pride about directing Mega Pharma?
The first thing is to have convinced the shareholders to do this project and even more, to have it here, at home.
Generating job opportunities for a sector that was not developed before, having room for young chemists fills me with pride too.
And of course, to create a country that is a little more interesting for my kids too. I am proud today and I will be more in a few years; I see how it all has developed.